Tax Share By Bracket: An Update

The IRS recently released data on individual income taxes, and the Tax Foundation has nicely summarized the data, and I've put the data in the chart below. The story hasn't changed: upper-income earners continue to pay a hugely disproportionate share of total income taxes.

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In 2010, it took $370K adjusted gross income to make it into the top 1% of income earners, and they paid almost 40% of all federal income taxes. The top 5% of income earners made at least $162K and paid almost 60% of all federal income taxes. The top 10% paid made at least $17K and paid a little over 70%. The top 25% included all those making $69K or more, and they paid over 87% of all federal income taxes. Meanwhile, the bottom 50% of income earners (those making $34K or less) paid only 2.4% of all federal income taxes, and the vast majority of them either paid no income tax or received money on net from the IRS.

One other important thing to note is that the share of total income taxes paid by the top 10% of income earners today has risen by 40% since the early 1980s, despite the fact that the top income tax rate has been cut in half. This is powerful evidence that the tax code remains highly progressive despite big cuts to top tax rates.

Let's talk "fairness:" The top 10% of income earners in this country already pay over 70% of federal income taxes, and the top 1% (the rich) already pay almost 40%. Is that not enough? Almost half of those who work pay no federal income taxes. Is that fair? Is it healthy for so few to pay so much, and for so many to pay nothing? When almost half the population has no skin in the game, and another quarter pay only a very small share of total taxes, it is easy to demonize or exploit the rich—it's called the "tyranny of the majority."

These are very sobering statistics. Instead of asking the rich to pay even more, we should be thinking about how everyone should pay at least something. Just paying your social security taxes doesn't count, because in theory—if not in practice, since the rich will undoubtedly subsidize the social security income of a great many people in the future when social security revenues fail to cover expenditures—that is money you will get back when you retire. Income taxes, in contrast, go into the general fund.

UPDATE: The chart below shows the share of total income earned by each of the groups in the chart above. Not surprisingly, top income earners make a large share of total income. However, if you compare the two charts, you see that the share of total taxes they pay is much larger than the share of income they earn. Our tax code is very progressive no matter you look at it. In 2010, for example, the top 1% of income earners made 19% of the country's total adjusted gross income and paid 37% of total income taxes. The top 5% earned 34% of total income and paid 59% of total taxes. The top 10% earned 45% of total income and paid 71% of total taxes. The top 25% earned 68% of total income and paid 87% of total taxes.